Disney to pay at least $500 million for YouTube video maker

Highlighting Web video's growing value to big media, The Walt Disney Company on Monday said it would acquire Maker Studios for an initial sum of $500 million.

Maker Studios is a leading producer and distributor of short, entertaining videos on YouTube, many of which are geared toward millennials. Its vast array of online channels total 5.5 billion YouTube views per month, according to Maker, which makes it one of the most successful online video companies of its kind.

In effect, Maker has helped create a whole new universe of shows, made for the Web rather than television, and now Disney can learn from them. This is especially important because key Disney demographics — like teenagers — are flocking to YouTube and other online video destinations.

Interestingly, Maker will not be folded into one of Disney's television or film divisions; instead, its executives will report directly to Disney's chief financial officer, under the theory that this will ease collaboration with multiple divisions.

Disney said it expected the acquisition to close sometime in the spring. On top of the $500 million, Maker's shareholders may receive up to $450 million more over time, depending on whether Maker achieves its performance targets.

Roughly $70 million had been invested into Maker, including $25 million from the investment arm of Time Warner, the parent of this website.

The $500 million — possibly $950 million — figure will set a new bar for startup online video networks. When The Wall Street Journal broke the news earlier this month that Disney and Maker were talking, the newspaper said it "would mark the biggest acquisition by a major media company in the fast-growing but challenging business of producing and promoting video programming on Google's YouTube."

"Maker's YouTube-centric DNA would give Disney valuable insight into how to extend its star-making machine to the still quite opaque online realm," industry analyst Will Richmond, the publisher of Videonuze, wrote at the time. "But star-making is just half of the equation. The other, equally important half is mastering (and quite possible shaping) how online video distribution works, and what role YouTube will play."

Other major media companies have pursued similar questions through acquisitions. Two years ago, Discovery Communications bought a different kind of video startup, Revision3, for a reported $30 million. One year ago, DreamWorks Animation agreed to an initial sum of $33 million to acquire AwesomenessTV, a network of teen-oriented YouTube channels. Depending on the performance of AwesomenessTV, that deal may be worth $117 million over time.

Earlier this month, the Warner Bros. division of Time Warner led an $18 million round of funding for another YouTube-centric online video network, Machinima.

Bob Iger, the chief executive of Disney, said in a statement on Monday that "short-form online video is growing at an astonishing pace and with Maker Studios, Disney will now be at the center of this dynamic industry with an unmatched combination of advanced technology and programming expertise and capabilities."